Taxable Scholarships

[Lion EA]

Scholarships in excess of tuition are taxable for income tax purposes. Does the excess trigger Social Security & Medicare taxes?

[Hahn1040]

no ss or med

it is added to line 7 wages (or what used to be line 7)

thus, if the student's income is below the standard deduction, then there is no taxable income

This can be used to "free up" qualified tuition for the American Opportunity credit on the parent's return

[Lion EA]

Thank you. I have it flowing to "wages" with SCH next to it. With the standard deduction, it does wipe out income tax. Unfortunately, the student's summer internship was reported on a 1099-MISC, so SE tax.

[Max W]

2 hours ago, Lion EA said:

Thank you. I have it flowing to "wages" with SCH next to it. With the standard deduction, it does wipe out income tax. Unfortunately, the student's summer internship was reported on a 1099-MISC, so SE tax.

Internship income could be exempt from SE depending on F&C.

https://www.irs.gov/charities-non-profits/student-exception-to-fica-tax

[Lion EA]

Student was a paid intern in the legal department of a commercial properties firm in Greenwich, CT. Had to buy dress shoes, belt, pants; and no, I did not deduct those. Very definitely not a not-for-profit. But, hey, he's getting a Yale education and almost $5,000 per summer job for less than $730 in taxes. A great deal. But, he's a great kid of a hardworking single mom violin teacher/yoga teacher. And, he volunteered with VITA, so why he forgot to prepare his own tax return... I like his mom, but I'm charging for this kid's return.